Alibaba Group Holding Inc. (NYSE:BABA) shares are recovering from near record lows.
That does not change the fundamental outlook for the near term, as the company is contending with multiple headwinds.
What Happened: Alibaba is widely expected to report earnings per share of $1.15 for the March quarter, down from $1.59 in the year-ago quarter. The consensus estimate is a scale back from the $1.46 per share analysts estimated 90 days ago as well as 60 days ago. The negativity became evident only over the last month, suggesting the tempered expectations may have to do with COVID lockdowns in China.
The EPS estimates have been lowered for 2022 and the outyear as well. The bottom line estimate for the fiscal year ending March 2022 has been lowered from $8.32 per share to $7.83 per share and, for fiscal year 2023, from $9.23 per share to $8.12 per share.
Revenue growth is also expected to slow to from 10% in the December quarter to 5.5%.
Why It's Important: Following a resurgence of COVID infections in China in mid-March, the government enacted stringent measures, keeping in line with its zero COVID policy. These include complete lockdowns in COVID-hit regions, essentially shutting down factories.
Alibaba's fundamentals began to take a turn for the worse since 2021 amid a slowing domestic economy and intensified rivalry from peers and short-video shopping apps. To make matters worse, the Communist regime in China adopted a hostile attitude toward high-profile technology companies in a bid to rein in their clout.
Alibaba was the first to bear the brunt of regulatory clampdown after its founder Jack Ma made comments against the government in a public appearance.
Given Alibaba's dominant market position and the cloud opportunity, analysts are still optimistic of a turnaround down the line. The average analyst price target for Alibaba is $171.40, according to TipRanks. This suggests the stock could nearly double from the current depressed levels.
BABA Price Action: Alibaba shares were surging 10.95% to $100.84 Friday morning, according to Benzinga Pro data.
Photo courtesy of Alibaba.